The USA has also been borrowing money at the fastest rate ever, outside of a major war. Recently, it has settled on borrowing of about half-a-trillion dollars a year. The basic idea is that borrowing and spending sparks economic growth and creates jobs, by releasing the "animal spirits". The USA is now over $20 Trillion in debt. Think Keynes, run amok.
Finally, the USA has been stripping away many unionization and other workers protections and supports in the name of increased productivity and rendering jurisdictions "business friendly", often at the state level.
How have these theories and policies worked out, and what may we reasonably expect of some key aspects of the American economy should the USA continue on this path to 2030?
Real Income: American workers now earn basically what the earned shortly after Reagan started the "give money to the rich and everyone will benefit", trickle-down tax cut theory in the 1980s. Since the mid-1960's, median income in the USA, accounting for inflation is only up 21%. There has been very little comparative gain for the vast majority of Americans since the early 1990s. The rich, defined as the top 5% of income earners, now control more than 62% of the income in that country - the USA is not a middle class country, and has not been a middle class country for some time now.
See the inflation adjusted chart here.
https://www.advisorperspectives.com/dshort/updates/2017/09/19/u-s-household-incomes-a-50-year-perspective
In 30 years, one would expect that the wealthy in the USA, defined as the top 5% of income earners, will control upwards of 70% of all income.
Employment: The official unemployment rate in the USA is 4.1%. This rate is U3 according to the US Bureau of Labor Statistics. Note that U3 only counts people who have been unemployed for three weeks or less – if you have been unemployed for three weeks and one day, you are not counted. The rate is therefore exceptionally misleading as a description of the actual unemployment situation in the USA.
The measure of U6 covers persons who are unemployed or underemployed (i.e. working part-time, but want a full time job) over a time frame of a full year. This rate is just over 8%, which, from an historic perspective is actually pretty good. This is the rate that Janet Yellen looks at into help guide the policy of the US Federal Reserve Board.
The measure of U6 only covers a period of one year. The US Bureau of Labor Statistics does not track persons who are unemployed beyond one year, and has not done so since 1994. In short, the USA does not officially track the actual level of unemployment in that country, loosely defined as the percentage of the workforce that is either unemployed, or underemployed, and who would normally be seeking work.
This rate is tracked by organizations like Shadow Stats, which seeks to apply the pre-1994 definition of unemployment, which looked at unemployed people (“long term discouraged workers”) who had been out of work for more than a year. According to Shadow Stats, the actual unemployment rate in the USA was about 15% in 1995, and is over 21% now using the measure of unemployment that was used prior to 1994. Very roughly, this is an increase in the actual unemployment rate of about 0.25% a year.
http://www.shadowstats.com/
While this may seem preposterous to some, the fact is that there are about 41 million Americans living on food stamps right now – this total was 16 million people in 2000, and 28 million in 2008, and is therefore rising by about 1.5 million people a year. These people are not working - it is as if every new citizen in the USA in the last 15 years or so has gone straight onto the rolls of those who are receiving food stamps. This is about 12.6% of the American population – one in eight people live in abject poverty in the USA.
We also know that there are about 10 million able-bodied men in the USA – ages 18 – 54 – who are also not working. It should be obvious that it is impossible for the actual unemployment rate to be 4.1% when there are ten million unemployed men in that country, and 12.6% of the population lives on food stamps.
If these trends continue, both for the unemployment rate and the number of people on food stamps, then by 2030 the USA should have about 60 million people, or about one in six Americans living on food stamps, and a real unemployment rate of about 25 – 26%.
Labour Force Participation: In 2000, 70.1% of able-bodied Americans were in the workforce. Today, that number is about 62.8%. With a workforce of about 155 million people, a drop of about 7.3% in labour force participation represents about 10 million fewer people actually working in the USA, with a drop of about 550,000 working people a year.
The normal explanation for this phenomena is the fact that the Baby Boomers are retiring in droves, therefore there should be fewer people working. The problem with this is the fact that, according to the St Louis Federal Reserve Board research, the only section of the US population to show a percentage growth in their membership in the US work force are people over 55 years of age. Fewer and fewer people younger are actually working, as a proportion of the group. So while the number of Baby Boomers entering retiring age is rising, so is the percentage of that population that is actually working. This is not supposed to be happening, and it strongly implies that many Baby Boomers are not retiring, likely because they can’t afford to, and because they are actually working more as a proportion of their group, they are crowding out employment opportunities of younger persons.
If this trend continues, by 2030 the USA should have an effective workforce of about 7 million fewer people, and a Labour Force Participation rate of about 58%. The Baby Boom generation will be severely limiting future prospects for young and middle aged people as it continues to work, given that they do not have enough to live on in retirement. This could easily become the focal point for very damaging intergenerational economic, social and political strife.
US Government Debt: This is simple. A wonderful site called “US Debt Clock” actually calculates US debt, both present and future, on a real time basis. It is simple to extrapolate where we will be in 2030.
As of today, with a deficit of about $725 Billion a year, and a debt of about $20.6 Trillion, the estimated US National Debt in 2030 will be about $29.3 Trillion. The yearly interest payments on this debt could easily top $800 Billion a year, and over 12% of the budget.
Two or even Three Americas?: The USA appears to be doing very well economically at the moment. House prices have been rising for years, the stock markets are at historic highs, business profits are way up, and the unemployment rate for the America that actually counts is very low.
The top 5% of income earners essentially own that country now. The next 30% of income earners is doing well enough, but the bottom 75%, and especially the bottom 40%, of the people in that country are suffering, and they are poised to suffer far more. They essentially count for next to nothing, and are not even included in some important statistics anymore. It is as if they are part of a different country.
The social, cultural and especially political implications of income inequality like this are profound. It may be that the only way the rich can keep the gains from 35 years of acquisitive tax policy on the part of their bought and paid for servants in the US Congress is to keep people from voting, because it should be obvious that almost no country on Earth will be more primed for a socialist revolt that the USA by 2030.
The Sanderistas beckon.
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